Trades Support CFPB’s Non-Working Spouse Amendment

In general, both NAFCU and CUNA support the Consumer Financial Protection Bureau’s rule that would amend Regulation Z to allow non-working spouses easier access to a credit card.

However, the two trade associations differed over some details in their comment letters.

The proposed rule, issued in October 2012, would remove all references to an independent ability to pay requirement for credit card applicants 21 years of age or older that was added to Reg Z by the Federal Reserve after the CARD Act was passed in 2009. The change would make it easier for non-working spouses and partners to obtain credit.

Tessema Tefferi, NAFCU senior regulatory affairs counsel, wrote in his comment letter that his trade strongly supports the proposed rule, calling it a “common sense change.”

“The CFPB should move swiftly to finalize this rule with an immediate effective date,” he said.

However, Tefferi added that NAFCU encourages the CFPB to also amend Reg Z’s ability to repay rule for share-secured credit cards. Because the borrower’s ability to repay is secured by assets, there should be no need for ability-to-repay analysis, he said.

CUNA also supports the proposed rule, but Assistant General Counsel Luke Martone wrote in the trade’s comment letter that lenders could open themselves up to litigation when determining whether an applicant has a “reasonable expectation of access” to a working spouse’s income.

“We believe this could occur not only in instances where the issuer denies the applicant upon determining a lack of reasonable expectation of access, but also in instances where the issuer determines such access exists yet denies the applicant based on other aspects of the issuer’s underwriting process,” Martone wrote.

To remedy the potential problem, Martone suggested the CFPB grant sole discretion to the card issuer in determining whether the applicant has reasonable expectation of access to shared income, and whether to further extend credit to the consumer. Martone also asked the CFPB to further clarify what factors an issuer may consider when determining a reasonable expectation of access.

CUNA also took issue with one of the CFPB’s four examples of when an applicant may or may not have reasonable expectation of access to household income. The questionable example assumed a non-working applicant has no access to household income, but the income is regularly used to pay the applicant’s expenses.

“We believe it would be prohibitively difficult, if not impossible, for smaller credit card issuers – including credit unions – to verify the fact pattern,” Martone wrote.

Martone also requested the CFPB clarify how reasonable access would apply to marriages in community property states, if a single application form could be used for working and non-working applicants, and if the rule could be applied to non-working spouses under the age of 21.

The proposed rule would impact more than 16 million non-working spouses, present in approximately one-third of all U.S. marriages, according to the Census.